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Small-Business Loan Program, Chaotic From Start, Gets 2nd Round Small-Business Loan Program, Chaotic From Start, Gets 2nd Round
(10 days later)
One day before the federal government’s $349 billion aid program for small businesses was set to go live, the chief executive of a Minnesota bank was frantically dialing officials in Washington. Grand Rapids State Bank needed more time to understand the program, said the executive, Noah W. Wilcox, even as it faced a crush of borrowers. His pleas went unheeded.One day before the federal government’s $349 billion aid program for small businesses was set to go live, the chief executive of a Minnesota bank was frantically dialing officials in Washington. Grand Rapids State Bank needed more time to understand the program, said the executive, Noah W. Wilcox, even as it faced a crush of borrowers. His pleas went unheeded.
“Somebody put a stake in the ground and it just wasn’t moving,” said Mr. Wilcox, who is also the chairman of the Independent Community Bankers of America, which represents about 5,000 institutions. “Secretary Mnuchin was not budging one inch from the date he initially set.”“Somebody put a stake in the ground and it just wasn’t moving,” said Mr. Wilcox, who is also the chairman of the Independent Community Bankers of America, which represents about 5,000 institutions. “Secretary Mnuchin was not budging one inch from the date he initially set.”
Late on April 2, just hours before the opening, the Treasury Department released details on the Paycheck Protection Program. Treasury Secretary Steven Mnuchin told would-be borrowers that they would receive funds within a day, but the program, which promised speed, also brought chaos.Late on April 2, just hours before the opening, the Treasury Department released details on the Paycheck Protection Program. Treasury Secretary Steven Mnuchin told would-be borrowers that they would receive funds within a day, but the program, which promised speed, also brought chaos.
The rules confused lenders, including small community banks as well as Wall Street firms less familiar with the Small Business Administration, which was establishing the program. They were unsure about who would qualify for loans, how the loans would be distributed and how they would eventually be forgiven.The rules confused lenders, including small community banks as well as Wall Street firms less familiar with the Small Business Administration, which was establishing the program. They were unsure about who would qualify for loans, how the loans would be distributed and how they would eventually be forgiven.
Some of the program’s rules were lax, allowing more than 200 publicly traded companies to obtain loans totaling more than $750 million. Yet, some small businesses that did get loans called the rules too restrictive, saying that it would be more helpful if they could use the funds to retool their operations for after the pandemic rather than paying employees.Some of the program’s rules were lax, allowing more than 200 publicly traded companies to obtain loans totaling more than $750 million. Yet, some small businesses that did get loans called the rules too restrictive, saying that it would be more helpful if they could use the funds to retool their operations for after the pandemic rather than paying employees.
The government has since published new guidance strongly discouraging public companies from using the program and urged those that did take the money to return it. Some have; others haven’t.The government has since published new guidance strongly discouraging public companies from using the program and urged those that did take the money to return it. Some have; others haven’t.
And the cash ran out in 13 days, leaving many small business owners waiting in line and increasingly desperate. As the federal government prepares to replenish the fund with $310 billion more, lenders expect the second round, which will open for applications at 10:30 a.m. on Monday, to be depleted even faster.And the cash ran out in 13 days, leaving many small business owners waiting in line and increasingly desperate. As the federal government prepares to replenish the fund with $310 billion more, lenders expect the second round, which will open for applications at 10:30 a.m. on Monday, to be depleted even faster.
“As soon as they turn the switch on, that money will be gone,” said Tony Wilkinson, the chief executive of the National Association of Government Guaranteed Lenders, a trade group.“As soon as they turn the switch on, that money will be gone,” said Tony Wilkinson, the chief executive of the National Association of Government Guaranteed Lenders, a trade group.
Small companies — those with under 500 workers — employ nearly half of America’s private sector work force. Most run on thin margins and have scant savings. For restaurants, gyms and other small businesses that depend entirely on people walking in the door, sales fell to zero after stay-at-home orders went into effect.Small companies — those with under 500 workers — employ nearly half of America’s private sector work force. Most run on thin margins and have scant savings. For restaurants, gyms and other small businesses that depend entirely on people walking in the door, sales fell to zero after stay-at-home orders went into effect.
The Paycheck Protection Program was intended as a backstop to dissuade layoffs. Under the program, small businesses could borrow up to two and a half times their average monthly payroll cost. If they used the money to retain workers and keep paying them for at least eight weeks, the loan would be forgiven in full, and they could use a portion of the cash for certain other expenses, like rent and utilities.The Paycheck Protection Program was intended as a backstop to dissuade layoffs. Under the program, small businesses could borrow up to two and a half times their average monthly payroll cost. If they used the money to retain workers and keep paying them for at least eight weeks, the loan would be forgiven in full, and they could use a portion of the cash for certain other expenses, like rent and utilities.
“We knew demand would be through the roof,” said Jim Donnelly, the chief commercial officer at Bangor Savings Bank in Maine.“We knew demand would be through the roof,” said Jim Donnelly, the chief commercial officer at Bangor Savings Bank in Maine.
The program was hastily designed after a difficult debate in Congress. Democrats had wanted the government to provide cash infusions to small businesses through tax rebates or by having the Treasury work directly with payroll processors to administer payments. They had also wanted it to cover 16 weeks of payroll, rather than eight. Republicans wanted to steer the program through private sector financial institutions. They won.The program was hastily designed after a difficult debate in Congress. Democrats had wanted the government to provide cash infusions to small businesses through tax rebates or by having the Treasury work directly with payroll processors to administer payments. They had also wanted it to cover 16 weeks of payroll, rather than eight. Republicans wanted to steer the program through private sector financial institutions. They won.
The government adapted a decades-old program run by the S.B.A. that guaranteed small business loans issued by a network of banks nationwide. That allowed the government to essentially outsource most of the program’s legwork to banks, making its adoption speedier. But the S.B.A. and the banks had never before operated a program of this scale. Last year, the S.B.A. backed around $30 billion in loans. Now, it was expected to process more than 10 times that volume, in just a few weeks.The government adapted a decades-old program run by the S.B.A. that guaranteed small business loans issued by a network of banks nationwide. That allowed the government to essentially outsource most of the program’s legwork to banks, making its adoption speedier. But the S.B.A. and the banks had never before operated a program of this scale. Last year, the S.B.A. backed around $30 billion in loans. Now, it was expected to process more than 10 times that volume, in just a few weeks.
And the administration wanted the money out the door immediately beginning on Friday, April 3. “This will be up and running tomorrow,” Mr. Mnuchin said on Thursday night. “You get the money. You’ll get it the same day.”And the administration wanted the money out the door immediately beginning on Friday, April 3. “This will be up and running tomorrow,” Mr. Mnuchin said on Thursday night. “You get the money. You’ll get it the same day.”
To bankers, that was an absurd promise. It typically took them days to prepare even the simplest loan paperwork and go over the fine print with borrowers. As Mr. Mnuchin spoke, they were still waiting for critical information and materials. For example, the S.B.A. usually required lenders to use a specific promissory note for loans it guaranteed. The agency had not yet provided that note for the new program’s loans.To bankers, that was an absurd promise. It typically took them days to prepare even the simplest loan paperwork and go over the fine print with borrowers. As Mr. Mnuchin spoke, they were still waiting for critical information and materials. For example, the S.B.A. usually required lenders to use a specific promissory note for loans it guaranteed. The agency had not yet provided that note for the new program’s loans.
Many community banks decided to simply start lending and accept the risk that some details would need to be hashed out later. BancFirst, Oklahoma’s largest S.B.A. lender, set up a war room, enlisted employees from across the bank, and ran six-hour work shifts around the clock starting Friday night.Many community banks decided to simply start lending and accept the risk that some details would need to be hashed out later. BancFirst, Oklahoma’s largest S.B.A. lender, set up a war room, enlisted employees from across the bank, and ran six-hour work shifts around the clock starting Friday night.
“We went 24/7 for four consecutive days,” said Kent Faison, the president of BancFirst’s commercial capital group. The volume was a “fire hose” like he had never seen before. Last year, his group made around 130 S.B.A. loans. This month, it issued more than 5,500.“We went 24/7 for four consecutive days,” said Kent Faison, the president of BancFirst’s commercial capital group. The volume was a “fire hose” like he had never seen before. Last year, his group made around 130 S.B.A. loans. This month, it issued more than 5,500.
Larger banks struggled to handle the staggering customer demand, especially as bank divisions that don’t typically deal with the S.B.A. were pulled in. Banks also imposed their own rules on who to lend to.Larger banks struggled to handle the staggering customer demand, especially as bank divisions that don’t typically deal with the S.B.A. were pulled in. Banks also imposed their own rules on who to lend to.
Bank of America started accepting applications right away, but its rules blocked many of its customers. JPMorgan Chase’s customers found themselves trapped in an enormous backlog. Wells Fargo, constrained by lending restrictions imposed by the Federal Reserve for its history of bad behavior, told most of its applicants that it would not be able to help them. And Citibank waited days to even begin taking applications from most of its small business customers.Bank of America started accepting applications right away, but its rules blocked many of its customers. JPMorgan Chase’s customers found themselves trapped in an enormous backlog. Wells Fargo, constrained by lending restrictions imposed by the Federal Reserve for its history of bad behavior, told most of its applicants that it would not be able to help them. And Citibank waited days to even begin taking applications from most of its small business customers.
As borrowers’ applications flooded in, gaps became apparent. Under longstanding S.B.A. rules, landlords, money lenders, political lobbyists and some other businesses were excluded. So were felons convicted within the last five years — an exclusion that cut off some people trying to rebuild their lives, and the employees who worked for them.As borrowers’ applications flooded in, gaps became apparent. Under longstanding S.B.A. rules, landlords, money lenders, political lobbyists and some other businesses were excluded. So were felons convicted within the last five years — an exclusion that cut off some people trying to rebuild their lives, and the employees who worked for them.
Other companies that seemed to test the program’s boundaries slipped through. In addition to several big restaurant chains, mining companies, drugmakers, software developers and manufacturers with access to equity markets and commercial loans were able to get loans using the taxpayer-funded program.Other companies that seemed to test the program’s boundaries slipped through. In addition to several big restaurant chains, mining companies, drugmakers, software developers and manufacturers with access to equity markets and commercial loans were able to get loans using the taxpayer-funded program.
For some small businesses, the program worked. In late March, sales for Thomas Fennell’s translation business in Omaha, C3 Translators, dried up. He feared he would soon run out of cash to keep paying salaries for himself and his husband, the company’s two employees.For some small businesses, the program worked. In late March, sales for Thomas Fennell’s translation business in Omaha, C3 Translators, dried up. He feared he would soon run out of cash to keep paying salaries for himself and his husband, the company’s two employees.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
Mr. Fennell applied for a loan through the First National Bank of Omaha two days after the program opened. A week later, his application was approved. His check, for just under $20,000, arrived on April 17.Mr. Fennell applied for a loan through the First National Bank of Omaha two days after the program opened. A week later, his application was approved. His check, for just under $20,000, arrived on April 17.
Because the loan will cover payroll, he plans to spend some of his savings to hire a local company to build a website for his business.Because the loan will cover payroll, he plans to spend some of his savings to hire a local company to build a website for his business.
“I feel a strong moral obligation to keep this money circulating in the economy,” he said.“I feel a strong moral obligation to keep this money circulating in the economy,” he said.
But even a successful loan application can pose challenges.But even a successful loan application can pose challenges.
Naomi Pomeroy has two restaurants in Portland, Ore.: Beast, a 26-seat establishment serving a six-course tasting menu at two communal tables, and, across the street, Expatriate, a high-end cocktail bar. On Thursday, she got an email saying that her application for a loan for one of the two restaurants had been approved.Naomi Pomeroy has two restaurants in Portland, Ore.: Beast, a 26-seat establishment serving a six-course tasting menu at two communal tables, and, across the street, Expatriate, a high-end cocktail bar. On Thursday, she got an email saying that her application for a loan for one of the two restaurants had been approved.
The news would have thrilled thousands of other business owners. Ms. Pomeroy greeted it with grim reserve.The news would have thrilled thousands of other business owners. Ms. Pomeroy greeted it with grim reserve.
“I hesitate to take the money,” she said.“I hesitate to take the money,” she said.
To have the loan fully forgiven, she would have to rehire her employees immediately and pay them for two months, even though she cannot yet reopen her restaurant. The last of the 30 people she laid off five weeks earlier just started receiving unemployment benefits — and, with the $600 a week in additional federal benefits included in the stimulus bill, all of them are being paid more on unemployment than they earned working at her restaurants.To have the loan fully forgiven, she would have to rehire her employees immediately and pay them for two months, even though she cannot yet reopen her restaurant. The last of the 30 people she laid off five weeks earlier just started receiving unemployment benefits — and, with the $600 a week in additional federal benefits included in the stimulus bill, all of them are being paid more on unemployment than they earned working at her restaurants.
If Ms. Pomeroy takes the loan, she would prefer to spend the money retooling her spaces to fit social distancing guidelines. For Beast, that would mean getting rid of the two enormous tables and finding a way to turn a profit while serving fewer customers at a time. But renovations are not a permissible use of the emergency funds.If Ms. Pomeroy takes the loan, she would prefer to spend the money retooling her spaces to fit social distancing guidelines. For Beast, that would mean getting rid of the two enormous tables and finding a way to turn a profit while serving fewer customers at a time. But renovations are not a permissible use of the emergency funds.
“If we could only open back up at 50 percent capacity and I was forced to hire back 100 percent of my staff, then that doesn’t make sense,” she said. Ms. Pomeroy, who helped found an advocacy group, the Independent Restaurant Coalition, said she was not sure the aid program would really benefit anyone in the restaurant industry.“If we could only open back up at 50 percent capacity and I was forced to hire back 100 percent of my staff, then that doesn’t make sense,” she said. Ms. Pomeroy, who helped found an advocacy group, the Independent Restaurant Coalition, said she was not sure the aid program would really benefit anyone in the restaurant industry.
Lawmakers and Treasury officials played down the program’s hitches. On Sunday, Mr. Mnuchin told Fox News that the first round “impacted about 30 million workers,” and that he expected the second round to support roughly the same number.Lawmakers and Treasury officials played down the program’s hitches. On Sunday, Mr. Mnuchin told Fox News that the first round “impacted about 30 million workers,” and that he expected the second round to support roughly the same number.
Lenders fear that many business owners will be left wanting, again, if the new funding runs out fast. Economists have estimated that more than $1 trillion might be needed to fully meet the program’s demand.Lenders fear that many business owners will be left wanting, again, if the new funding runs out fast. Economists have estimated that more than $1 trillion might be needed to fully meet the program’s demand.
Bankers are preparing for a frenzy on Monday morning. Mr. Faison, at BancFirst, already has more than 850 applications ready to go.Bankers are preparing for a frenzy on Monday morning. Mr. Faison, at BancFirst, already has more than 850 applications ready to go.
Many lenders are telling applicants to brace for disappointment.Many lenders are telling applicants to brace for disappointment.
Robert A. Klein, who runs a management consulting business in Great Neck, N.Y., was one of thousands of Chase customers who got an email this week warning him that the bank had “an extremely large volume of applications” ahead of his.Robert A. Klein, who runs a management consulting business in Great Neck, N.Y., was one of thousands of Chase customers who got an email this week warning him that the bank had “an extremely large volume of applications” ahead of his.
“We expect that funds could run out again quickly,” Chase wrote. “We wanted to give you this information, so that you can decide if you would like to try applying with another lender.”“We expect that funds could run out again quickly,” Chase wrote. “We wanted to give you this information, so that you can decide if you would like to try applying with another lender.”
Jeanna Smialek contributed reporting.Jeanna Smialek contributed reporting.